16 minute read
Arnold P Kelsey
Selling a Multi-Million Dollar Business
If you’re thinking about it or you’ve decided to sell your multi-milliondollar business, how do you decide which business broker to choose?
The first obvious decision must be to go with a large reputable agency. It doesn’t matter how good the business broker is, to achieve a successful sale requires the support that can only be provided by a large agency.
In the current world we live in, the internet is vital for most businesses to operate successfully. It’s no different for business brokerage agencies. It is critical to attracting potential buyers.
Where do you find these buyers? The internet.
The majority of business sales are the result of advertising on all available websites. Let’s go back to why a large agency, simple reason, due to the large volume of businesses they are selling they can obtain a better deal when advertising.
The large agency is therefore in a position to advertise on a large number of websites, attracting the maximum number of potential buyers. The smaller agencies or the individual brokers are not able to do this.
Now that you’ve decided to go with a large agency, what’s next? Which business broker do you choose? You want someone with a solid reputation, someone who is successful.
Do you choose the broker who sells the largest number of businesses? This raises another question, the number might be high, but how many years did it take to achieve these results and where are any of the sales multimillion dollar businesses? broker ever been involved in multimillion dollar negotiations?
No disrespect to any broker, but keep in mind, that it is less demanding to sell low-end businesses than to sell multi-million dollar ones. The pool of potential buyers in the low-end sales is incredibly larger. Selling a multi-million dollar business is very different to selling businesses on the lower end of the market.
One of the most critical aspects of being a business broker is the art of negotiation. A broker might be extremely successful selling businesses that are worth a couple of hundreds of thousands or even lower, but will he achieve the same success selling a multi-million dollar business?
The calibre of buyers in the multimillion dollar market is far different to the ones on the lower end of the scale. Negotiating at this level is a completely different ball game. It is essential that the broker you choose can deal and negotiate with high profile, intelligent, highly educated individuals on an equal level. If your broker is not in the same league as those individuals, he might feel at a psychological disadvantage, he might feel bullied, and intimidated and therefore will not be able to negotiate the best outcome for you, his client.
You must choose a broker who has the background, the education, the experience and expertise in negotiating with high-end business professionals, lawyers, accountants and if need be, government officials. There might be a large number of excellent business brokers, but there certainly aren’t many who meet these criteria.
Contact me, if you are considering selling your multi-million-dollar business as I meet all of these criteria.
Arnold P Kelsey
Business Broker
M. 0458 073 621 E. arnold@absbrisbane.com
absbusinesssales.com.au
With over 20 years of experience as an owner operator of his own Manufacturing business, Arnold gained a thorough understanding of the complexities associated with being a business owner. Arnold has a thorough understanding of accounting principles and is able to appraise financials with excellent acumen. His MBA has also helped refine the skills needed so he can confidently assist you with either selling or buying a business.
The business broker industry is changing. Zoran Sarabaca from Xcllusive Business Sales recently spoke to Bsale about the future of business broking and his unique approach to the broker business model.
“I got into business because I was unemployable you see, I have actually never worked for anybody else myself. I used to have an electrical maintenance business I had to sell and I ended up selling it myself.” Zoran says of how he got into business broking, a very common story in his words.
Through his experience selling his own business, Zoran recognised a flaw in the business broking agency model and decided he wanted to build a business broking business and Xcllusive Business Sales was established in 2004. Starting in an office in Sydney, Xcllusive has expanded to regional NSW, Melbourne and now has offices in Brisbane, Adelaide and Canberra as well.
THE TYPICAL AGENCY
“When I started the business I never wanted to just work as a business broker, I always wanted a business broking business. That is a challenge. What happens now in business broking, is that it’s an agency model which is based on the real estate agency model which works in real estate but it doesn’t in business broking for a few reasons.”
“Real estate sales is very geographically specific. You can specialise in one street if you wanted to but in business broking, first there are not as many businesses as there are houses, and they’re also scattered all over the place. So you can’t have a tight geographical location that you’re gonna specialise in.”
Of course, brokers can specialise in certain verticals Zoran says, such as the health industry, post offices, “What I noticed that is lacking with a lot of these agencies, is the fact that they are run as the agency model. Which means if you come and work with them, they give you their card and the world is your oyster. So you have to go out there and find the business, then you're gonna sign the business up for lack of a better word and then you have to sell that business.”
Zoran said that one of the problems with this kind of model is that you, as the broker, have to run your own business within the business itself which ultimately encourages individual internal competition and you miss out on a team environment.
“It’s not a really pleasant place to be. It happens in real estate and it’s happening in business broking as well. For example, if I’ve got a lead I don’t want anybody to know if I’ve got a buyer, well I want to sell to this buyer and I don’t want anybody to know.” Zoran said. In this scenario you are “not getting too much out of the organisation” that you are working with.
With this in mind, Zoran said that upon founding Xcllusive they asked themselves “okay, what can we do so that we can eliminate that internal competition?”. “Engaging people to sell, and selling businesses, are different skills. Engaging people to sell, in real estate you don’t have to worry about it, you engage the house and the house sells itself. In business broking, you engage the business to sell and then the hard work starts.”
“Getting that deal across the line. It’s not about finding a buyer, when you find somebody who wants to buy you have to overcome all the obstacles, that's where brokers make money but here's the problem, that's very time consuming, and sometimes you’re gonna have multiple meetings in each week with the buyer and seller and Friday afternoon something happens you have to rush and drop everything to fix it. That doesn’t give you much time to find new businesses and without finding new businesses you’ve got nothing to sell.”
When brokers spend more than half of their time looking for businesses to sell, this means they have even less time to actually sell the businesses
“With less time to make the deal, the quality of work drops. So what we’ve done in our organisation is that we’ve actually got full-time people whose job it is to go out there and network, do what they
need to do generate interest for our organisation and do the regulation for those businesses and engage them and once engaged they pass it on to the broker. Then the broker only has to sell businesses, they don’t have to worry about when the next deal is going to come from and more importantly, they’ve got the time to actually structure the deal.” Zoran said.
BE A GOOD BUSINESS BROKER
Business broking is complex, according to Zoran to be a good business broker it is imperative to understand business operations, people's psychology, tax structures and more.
With having dedicated staff at Xcllusive who handle finding businesses to sell, Zoran said that they were able to attract “really good talent and get really good results”.
“We actually have more supporting staff than the brokers that help these brokers in the back end with not only administration and marketing, but also with regulations and bringing in businesses. What we manage to do is generate really good income for the brokers by the virtue of leaving about 60% of their time to work directly on business deals rather than looking to find the deals so they don’t have to worry about it.”
Zoran believes the future of business broking is not about finding businesses to sell.
“I’m 100% certain that for business brokers to survive going forward, not just to survive but to thrive, the whole industry needs to change to professional advice.”
Zoran said that when he started in business broking, he said that accountants would not recommend brokers but that now it is common practice, accountants will say “if you’re thinking about exit I’ve got a relationship with a broker, let’s bring the broker in, let’s see what they’ve got to say in terms of- etc…”.
“It’s not uncommon in our industry that we work with somebody who had a business for 20, 30, 50 years
and now they’re exiting, thats pretty much the largest portion of their net worth. When helping them through processing, it gets very emotional but its also very complex so brokers need to live up to that expectation.” Zoran said.
TECHNOLOGY AND BROKING
where you put as many businesses online as you can and just wait for something to sell. The AIBB is doing a great job with courses and education in order to be able to deliver a very specialised type of work which is quite complex.”
Technology is making certain tasks
for brokers a lot easier, finding buyers has become a much lower priority task.
“Once you find the buyer, negotiating this deal and facilitating the sale, getting the deal across the line and overcoming issues as they arise through due diligence through negotiation and its a very personal part so I really think the brokers job shifted because of technology a little bit
more deal-making by the virtue of finding a buyer being the smaller part.”
“But by no means will technology make a business broker obsolete, never, it was always about emotions and people, it was never [just] about business. A lot of
people think that technology will make your job super easy or it will overrun you. Technology will help with certain data tasks, to make it easier, but the core of deal-making still face-to-face, otherwise there is no deal.” Zoran said.
The brokers that will make good income and bring in good results are the brokers that engage with people, according to Zoran. They understand the ‘whole concept’, “The deal will not happen by itself, if you leave a deal alone, it will probably fall apart, so you have to project manage the people [involved] from people within the business to people outside the
business, all the way to lawyers and accountants on both sides.”
Zoran compared the process to rowing a boat across the river; “You have all these people in the boat and they all want to go across the river and they’re running around on the boat, you have to keep it balanced to get them all safely on the other side, that’s what a brokers role is.” “Finding a buyer is the easy part and its been easy since probably 2010. 2008 was the gfc and prior to that, the market was the local paper and business for sale section. In 2008 people stopped enquiring about businesses because they were worried about everything that was happening. You would put your ad in the paper for one weekend and you would pay $300 to $400 and you would have no calls. Do it next week and have no calls. People stopped advertising and everybody moved online.” Zoran said.
For a few years after 2010, Zoran said that the market was ‘very fragmented’ as so many people were building websites and trying to sell businesses online. The problem of finding buyers was quickly eliminated thanks to the innovation of these websites.
“You go on one of those websites and buyers will find you. Selling business stopped being about finding buyers, but actually getting the deal across the line, that’s why the brokers really have to improve their skills and improve their knowledge, work on less businesses and focus more on better results with fewer businesses.”
While technology can help to a degree, Zoran says that you really have to be personal and close with all of the people involved in the sale and keep your finger on the pulse, find systems to deal with issues that arise, mechanisms for de-risking certain sides of the transitions, managing people.
“That's where the creative aspect of deal-making and experience comes into play, that a good broker will come up with a solution for this not just to suggest but to also help implement.” Zoran said.
“You’ve got to share information, we put [out] a lot of free resources and that’s where the world is going. If you want to educate yourself, you can go online and
find enough information for just about anything from brain surgery to copywriting.”
It’s common for people to feel the need to hide their business practices, likely rooted in that internal competitive business model. Zoran said it was ‘silly’ to not share your information and knowledge. Broking is so complex that explaining your competitive advantage does not mean that someone can copy it.
Zoran said that one of the biggest problems on the market right now is when you’re talking to the seller, “where are you going to find the buyer?” They ask.
“Don’t worry about the buyer, buyers are everywhere, it's once we find the buyer how are we gonna get this across the line. I’ll tell you how we’re gonna find the buyer we’re gonna put the listing on bsale and they’re gonna come and call me, that's the easy part.” Zoran said.
FUTURE OF BROKING
On what to anticipate in the coming months, Zoran says he doesn’t know what will happen with the economy, that “no one knows what is going to happen with the economy, interest rates are going up and nobody can stop it.” Though the question is, how will it affect the business selling market? “I remember doing this [broking] when interest rates were 6 or 7 per cent and deals were still happening. In fact, a lot of people were ‘cashed-up’ bc it makes sense to hold the cash when people are getting 6% interest. So deals were happening sometimes faster when interest is higher because you can deal very quickly. If somebody has a million dollars in the bank and they’re buying a business for a million dollars, they are going to just withdraw the money, there is no finance [involved] they don’t have to sell shares or investment property in order to make the deal.”
On a positive note, business for everybody in the industry in general is going well right now Zoran remarks, that this was some what predicted going out of lockdown. With less people going to the market during lockdown.
“When we were in the lockdown a lot of sellers were thinking it was not a good time to put the business on the market, logic tells you that, but because of security and everything else a lot of buyers were looking to buy businesses, but there was nothing on the market. While you had a seller's market there were no sellers on the market, so that was going for about a year, year and a half and what happened in the last 12 months, all these people that didn’t sell started putting businesses on the market If it was a sellers environment during lockdown, out of lockdown with so many people bringing their retirement sooner, facing job insecurity and more, the trouble now is that it can be hard finding a good deal, as Zoran says:
“There is a lot distortion and operations in the business, for example some people had a fantastic two years because of covid, they were in such a line of business (lets say protective equipment) but some people got hammered because they couldn’t see clients or such as hospitality venues entertainment in general being shut down or severely limited. It's really hard to gauge where the business is and what kind of recovery and what kind of performance they're going to have going forward. That's here to stay in the long run but it will work itself out.”
Having been through recessions, major events such as the GFC and covid ( and other “hiccups” in Zorans words), experience shows that there is normally a six month lag.
“When something happens everybody freaks out and stops, then they realise the world didn't end, and there is a boost in sales!”
“When it goes down it opens up and you get this rush of people and to do the deal, it's just a timing issue…when you go back and look at the last 5 years, some years are up some are down, but the average is reached anyway.”
Going forward, Zoran says while he isn’t sure what will happen with the economy, he believes that business broking will see some delays but eventually, the same number of deals (even if clustered around an election for example) will still average out. With the election in May, we’re likely to see another boost in sales and activity.
SELL YOUR BUSINESS WITH CERTAINTY
Most successful agency for selling $1M+ quality businesses
By engaging our services, you will be engaging a major customer-focused business agency, able to achieve exceptional results for you and your business through a professional, Dedicated, Focussed and enjoyable process. To achieve this for you we will:
• Attract and sustain the best People passionately devoted to Customers, our Team, Vision and Mission of Xcllusive.
• Devote all of our resources and skills to finding the best-suited buyer for the sale of every business Xcllusive is engaged in. • Develop an excellent Understanding of every business we engage so that we can add the Best Value to both the buyers and the sellers during the processes of; preparation, marketing, introductions, presentation, due diligence, and negotiations as well as the legal processes through to the handover of the business. • Understand the emotional state and Feelings of all clients involved in transactions and lead them through the process, helping them to make their own informed decisions about their future.
• Maintain high Professional and Ethical standards at all times, remembering that Xcllusive exist to provide a solution and serve it’s clients.
• Invest time and resources in constantly Training and Educating team members so that the Xcllusive team can provide constant and high level of professional and customer service.
• Respect our clients wishes and be available to help them whenever they need us.
• Improve all systems through constant assessment and, most importantly, have Fun.
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